Scrap the $800,000 cap on Farm Management Deposits says NFF

Farmers have proven Farm Management Deposits are not a tax avoidance scheme and want restrictions eased. Should the government scrap the cap? VOTE NOW

NSW farmers drew their Farm Management Deposits down from $1.75 billion in June 2018 to $1.3 billion by June this year. Picture: Dylan Robinson

The National Farmers Federation is calling on the Federal Government to scrap the $800,000 cap on how much producers can squirrel away in Farm Management Deposits.

The call comes despite the 46,946 Australian farmers holding an average $131,995 in FMDs as at June this year, to bring the end of financial year total to almost $6.2 billion.

Federal Agriculture Minister David Littleproud announced a major review into FMDs in March this year so farmers could “have their say on how well the FMDs works and how it should work into the future”.

The NFF, Grain Growers and other industry groups lodged submissions with Mr Littleproud’s office by the April 30 deadline his department set as part of the review.

But more than seven months on and Mr Littleproud has failed to release any review findings or recommendations on improving the FMD scheme.

FMDs were introduced in 1999 to encourage farmers to deposit funds in bumper years and then only be taxed when they withdrew the money during drought years or when recovering from a natural disaster – effectively averaging out their tax bill.

Grain Growers chairman Brett Hosking said ultimately all farmers had to pay tax on their deposits as they withdrew them, so “it’s not a tax avoidance scheme”.

“You will see a lot of NSW growers wiped out by the floods drawing their FMDs down” Mr Hosking said.

Federal Department of Agriculture records show that during the most recent NSW drought farmers drew their deposits down from $1.75 billion in June 2018 to $1.3 billion by June this year. A similar drop occurred in Western Australia 12 months later, when deposits fell from $1.15 billion in June 2019 to reach $833,087 by June this year.

Victorian farmers seem to have weathered recent natural disasters better than their interstate counterparts, given their deposits have soared from $1 billion in mid-2017 to $1.56 billion by June this year.

In its submission to the review the NFF stated that while a “minimal number of primary producers having deposits exceeding the original $400,000 cap. this should not be an argument to limit or reduce the cap but remove caps altogether”.

“Farmers have clearly demonstrated the appropriate use of the FMDS that is tailored to their business and are not simply ‘maxing’ out caps for tax concession reasons.”

The NFF is also seeking:

FMD eligibility be explicitly extended to other business structures, such as

trusts and partnerships.

LIMITS on off-farm income be reviewed.

ALLOW the drawdown of FMD accounts over three years for

unforeseen circumstances, such as death.

INCREASE education and awareness on the benefits and implications of

various drought measures, including the FMDS.

ENSURE other government settings promote the use of FMDS, such as

prudential regulations.